Dow Chemical profit, revenue miss

By IBT Staff Reporter On 02/02/12 AT 12:56 PM

Dow Chemical Co's quarterly profit and revenue missed Wall Street's expectations as demand for electronics, plastics and coatings plunged, causing the company to slash production and aggressively discount some products.

The results sent shares of Dow, the largest U.S. chemical maker by revenue, down 1 percent.

Dow's operating rate, a reflection of its full capacity, fell 9 percentage points to 72 percent in the quarter, levels not seen since the last recession.

Most of the capacity cuts came in Europe, where the continent's debt crisis has sharply affected exports and where demand for Dow's products is weakest, Chief Executive Andrew Liveris told Reuters.

We quickly intervened and started moving volume and basically gave up on price, he said on Thursday. Europe is a headwind for the whole year.

The U.S. economy is actually recovering nicely, with electronic sales improving from a weak fourth quarter, though weak construction demand is a concern, he said.

The Chinese economy should continue to be strong, bolstered by large spending on manufacturing and construction, Liveris said.

I don't think we're going to have to worry about China being a less-than-6-percent growth economy for a long time, he said.

For the fourth quarter, the company posted a net loss of $20 million, or 2 cents per share, compared with net income of $426 million, or 37 cents per share, in the year-ago period.

Excluding one-time items, the company earned 25 cents per share.

By that measure, analysts expected earnings of 30 cents per share, according to Thomson Reuters I/B/E/S.

Revenue rose only due to a 5 percent price increase across the company -- roughly $675 million -- though the price increase dented volume by 3 percent.

Dow promised to continue to keep costs low, though it's not clear how much of an affect that is having in the first quarter.

Obviously owing to the size of their portfolio, they will not see the full benefit of reduced costs right away, said Hassan Ahmed, a chemical industry analyst at Alembic Global Advisors. There's almost a quarter lag between costs declining and seeing the impact of that.

NO DOUBLE DIP

Liveris said he does not believe the United States will slip back into recession.

Dow has no plans to cut jobs or close plants, he added.

I've never been a big double-dip proponent in the U.S. because very unlike late 2008, the liquidity issue is not the issue anymore, he said.

Liveris noted Procter & Gamble's successful offering of a 10-year, $1 billion bond on Wednesday at a record-low 2.3 percent interest rate as evidence the access to capital for large projects is intact.

U.S. exports should continue to grow due to low-cost shale natural gas, he said. Prices for the feedstock, a key material Dow uses to make chemicals for plastics and other popular products, has plunged in the past year.

Dow is reopening a cracker, or chemical plant, in Louisiana later this year due to the low-cost gas.

Dow is considering a companywide hedging program for natural gas, Liveris said.

I think the U.S. is in a gradual recovery, Liveris said. The construction workforce needs to be redeployed, but I do believe the politicians are starting to address it.